Obamacare will stay. And it should, because it’s working

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For decades, policy wonks have bemoaned runaway health costs in the US.

But a funny thing has happened in the aftermath of the passage of the Affordable Care Act, known colloquially as Obamacare: Health care inflation has dropped markedly.

Just this morning, the US Bureau of Economic Analysis published numbers on the price index for US personal healthcare consumption expenditures. It was up a scant 0.61%, year-over-year. That’s the lowest since the early 1960s.

While healthcare prices started to fall in 2008 as the US economy weakened. But they’ve dropped further, and sharply, after the passage and implementation of the US Affordable Care Act, widely known as “Obamacare,” in 2010. Some would argue that this merely reflects lower utilization of healthcare in the aftermath of a recession. That was true for a while. But real spending on medical care—as well as medical hiring—have both turned up sharply over the last year, suggesting rising demand.

It’s hard to overstate how important this. Galloping healthcare inflation was one of the prime reasons the US fiscal future has looked so bleak. Roughly one out of every four dollars spent by the government in the US has gone toward medical care in recent years, mostly through the giant federal programs Medicare and Medicaid. In 2014, lower-than-expected medical costs was one of the main reasons the US budget deficit amounted to a smaller-than-expected 2.8% of GDP.